Who will use Tesla's robo-taxi? There are 2 big challenges.

Robo-taxis represent an early test case of two critical points for Tesla.
Will American consumers trust robots? And will damage to the brand done by CEO Elon Musk's politics jump from Tesla cars to Tesla taxis?
Investors will get early indications on both points on Sunday, when the electric-vehicle company is set to launch its robo-taxi service in Austin, Texas on Sunday. Invitations to a select group of customers have been sent out, allowing people to hail a handful of cars operating in a relatively small area.
Human safety monitors will be sitting in the front passenger seat, and Tesla will have so-called teleoperators standing by to step in remotely if needed. Alphabet's Waymo, the dominant robo-taxi service so far, uses teleoperators as well.
The modest launch might be a disappointment, but it is still a very big deal. It's a chance for Musk to finally deliver self-driving cars, after promising them repeatedly for the better part of a decade, wrote Guggenheim analyst Ronald Jewsikow in a recent report.
'The June robo-taxi launch represents a seminal achievement after [years] of self-driving promises," Jewsikow wrote. That is particularly positive in that it comes from an analyst who rates Tesla stock at Sell.
Expanding the service to bring in significant revenue, helping to justify years of investment, is a much bigger deal for Tesla and Tesla investors. A challenge to overcome there will be any potential pushback from consumers turned off by Musk's support for President Donald Trump and rough-and-ready efforts to slash the size of the federal government.
Tesla car sales fell 13% year over year in the first quarter, partly because left-leaning shoppers, the group most likely to buy electric vehicles, steered clear of the brand. Wall Street expects a 10% decline in the second quarter, according to FactSet.
While Tesla management acknowledged challenges for the brand on their first-quarter earnings conference call, isn't clear whether that will affect the robo-taxi launch. Like so much with Tesla, opinions vary widely.
'One hundred percent," said GLJ analyst Gordon Johnson, when asked if Tesla's brand problems will extend to robo-taxis. He said he doesn't believe the technology is ready, citing the fact that Tesla has chosen to use in-car safety monitors.
'The backlash from consumers will likely be severe given it seems Tesla is endangering the driving public in Austin with this launch," Johnson said. A longtime Tesla bear, he rates the shares at Sell.
Cantor Fitzgerald analyst Andres Sheppard, who rates the shares at Buy, doesn't see any major backlash coming. 'We don't think so," said Sheppard. 'There should be some getting used to the vehicles and the technology."
Aside from branding, the fact that the technology is unfamiliar could represent a barrier to adoption. Not everyone will feel comfortable without a driver, or even a safety monitor, in the car.
Still, that shouldn't be a problem early on for any self-driving technology. 'The people I talk to, colleagues and friends, are excited to [try] it," says Zacks stock strategist Andrew Rocco, adding that early on, 'Airbnb sounded like a crazy idea." Rocco runs Zacks' Technology Innovators Portfolio, which holds Tesla stock.
Alphabet's Waymo hasn't had trouble filling its self-driving cabs. It completes more than 250,000 paid cab rides each week with a fleet of some 1,500 taxis.
It is tough to argue that Waymos aren't better than regular drivers. It reports 88% fewer crashes with serious injuries, and 79% fewer accidents in which air bags are deployed.
So far, self-driving cabs are doing just fine. 'Consumers love robo-taxis," Jewsikow said. Today, Waymo has about 15% of the ride-hailing market in San Francisco, up about 14 percentage points since the start of 2024.
Whatever happens, investors should brace for volatility. For months to come, every problem, be it an act of vandalism or a car unable to complete a trip, and every success, such as service expansion, will be scrutinized by investors and Wall Street.
Tesla investors, however, are used to that. Tesla stock, by some measures, is about three times as volatile as other large tech stocks.
Write to Al Root at allen.root@dowjones.com

Try Our AI Features

Explore what Daily8 AI can do for you:

Learn with AIFact CheckingText to SpeechAI Summary

Related Articles

Hindustan Times

an hour ago

• Hindustan Times

Elon Musk launches Tesla robotaxi in Austin: Here's how rides are priced

Tesla's long-hyped robotaxi was launched on Sunday afternoon, as per CEO Elon Musk who announced the rollout on his platform X (formerly Twitter). The first rides, priced at a flat $4.20 are now being offered in parts of Austin using driverless Tesla Model Y vehicles, stated a Reuters report. Several Tesla robotaxis were spotted Sunday morning navigating South Congress, a bustling neighborhood in the Texas capital, with no driver behind the wheel. A vehicle Tesla is using for robotaxi testing purposes on Oltorf Street in Austin(Bloomberg) Several social media users posted videos of robotaxis and noted that a single person was seated in the passenger seat, acting as a 'safety monitor'. The electric vehicle maker has not issued an official statement or provided details on the scope of the Tesla robotaxi launch, but a small group of influencers were invited to participate in a closely monitored pilot featuring 10-20 vehicles operating within a geofenced zone of Austin. Also read: Indian CEO slams Tesla for returning $1,000 fee: 'Elon Musk, do you know...' Texas lawmakers move to regulate autonomous vehicles The launch came days after Texas Governor Greg Abbott signed a new legislation requiring autonomous vehicle operators to obtain a state permit. Though the law does not go into effect until September 1, it signals a shift from Texas' previously hands-off approach to autonomous driving regulation. The law mandated operators like Tesla to attest to the safety of their AVs, provide emergency protocols for police and first responders, and comply with Level 4 autonomy standards, which means vehicles can drive themselves within specific conditions sans human intervention. Tesla deviating from norms by not relying on lidar/radar The Reuters report stated that Tesla was bucking industry norms by relying exclusively on cameras, without lidar or radar. Additionally, Musk has long argued that relying on cameras make Tesla's system both safer and more scalable, though critics have cited safety risks and past delays as cause for concern. Musk has spoken about self-driving cars over the years and now he is promising that safety will be a top priority as they roll out Tesla robotaxis in Austin. These cars will steer clear of bad weather, tricky intersections, and underage riders, and will only drive in areas where they are certain everything is safe, Musk said. The launch of Tesla's robotaxi is a big step for the company's future plans. Analysts think a lot of Tesla's long-term worth is dependent on how well they can commercialize their robotaxis and AI technologies, like humanoid robots. However, it is not all smooth sailing. Tesla's rival Cruise, owned by GM, recently had to suspend its operations following an accident, and both Waymo (Alphabet) and Zoox (Amazon) are operating under heavy regulatory watch. Tesla's unique approach, relying purely on cameras, sets it apart from the competition, but it also brings its own set of safety and liability issues. FAQs Q: Is Tesla launching robotaxis in Austin today? Yes, Elon Musk announced that Tesla has begun offering limited robotaxi rides in Austin as of Sunday afternoon. Q: How much do Tesla robotaxi rides cost? Tesla is offering the initial rides at a flat rate of $4.20. Q: Are the Tesla robotaxis fully driverless? Yes, the vehicles operate without a driver but currently have a front-seat 'safety monitor' during this pilot phase. Q: What level of autonomy do these vehicles have? Tesla's robotaxis are classified as Level 4 autonomous, meaning they can drive themselves under specific conditions without human input.

Hindustan Times

an hour ago

• Hindustan Times

Palou wins at Road America to boost IndyCar season lead

Alex Palou won his sixth IndyCar race in nine season starts, the Spaniard holding off Sweden's Felix Rosenqvist to capture Sunday's Grand Prix at Road America on low fuel. HT Image Palou boosted his season points lead by taking his first victory since last month's Indianapolis 500, enduring after 55 laps over the 4.014-mile, 14-turn road course in Elkhart Lake, Wisconsin. "It was a crazy race," Palou said. "Losing a ton of positions and then making them, it was a tough race for everybody." Palou became the first IndyCar driver since A.J. Foyt in 1975 to win six of the first nine races in a campaign. Rosenqvist was second, two seconds back, and American Santino Ferrucci was third, running out of fuel one turn after the checkered flag. Four caution flags in the first 23 laps prompted teams to adopt differing fuel strategies, and by lap 28 it was New Zealand's Scott Dixon leading. American Josef Newgarden was second before crashing on turn 14, leaving Dixon ahead with Palou and Rossi just behind after a lap-31 restart. The race came down to those three trying to conserve fuel over the final laps to reach the end while Rosenqvist, on full fuel in fourth, tried to overtake them. Rossi went to the pits with four laps remaining and Dixon pitted for fuel a lap later, leaving Palou to outlast Rosenqvist with his fuel tank nearly dry. "Kudos to the team for the amazing strategy and Honda for giving us the fuel mileage we needed to make it at the end," Palou said. "Couldn't be happier." Palou, seeking his fourth season title in five years, leads the points chase with 386 with American Kyle Kirkwood, a three-time winner this season, 93 points adrift in second. Palou matched the IndyCar record of three wins at Road America, also held by Mario and Michael Andretti and Emerson Fittipaldi. Rosenqvist settled for second on the track where his only IndyCar triumph came in 2020. js/bb

Business Standard

an hour ago

• Business Standard

We want to be a people-first organisation: Goldman Sachs CIO Marco Argenti

Engineers need to think about the problem first and not the solution, says Argenti premium Avik Das Bengaluru Listen to This Article Goldman Sachs, the storied American investment bank, is embracing generative AI (artificial intelligence) across its global operations, including its 9,000-strong workforce in India. In this exclusive interview with Business Standard, Chief Information Officer Marco Argenti discusses with Avik Das his strategic priorities, the evolving role of engineers, and why being people-first matters. Joining him, Gunjan Samtani, co-chairman and India head, talks of the future of the firm's engineering hubs in Bengaluru and Hyderabad. Edited excerpts… What are the three most important strategic priorities for you in the technology world?